VWAP (Volume Weighted Average Price) is the average price at which orders are executed, where each transaction price is weighted as a percentage of the transaction volume related to the transaction.

For example, when a trader places a large number of positions, according to the current market liquidity, the position can be filled at different prices.

VWAP summarizes all transactions from the start of the order to the completion of the order.

If you decide to buy 6 million euros in the market, the order will be executed at the first 3 levels of the trading book:

Sell ​​volume Offer price Point difference Bid price Buy volume
1,000,000 1.20204 0.1 point 1.20205 1,500,000
5,000,000 1.20203 0.3 point 1.20206 2,000,000
600,000 1.20202 0.5 point 1.20207 3,200,000
2,200,000 1.20202 0.6 point 1.20208 3,500,000
Note: The quotations and quantities in this table are for illustrative purposes only and will depend on current market liquidity.

The details are as follows:

  • Buy 1.5 million (15 lots) at the price of 1.2020 5 (cumulative transaction volume = 1.5 million; remaining fillable = 4.5 million)
  • Buy 2 million (20 lots) at the price of 1.2020 6 (cumulative transaction volume = 3.5 million; remaining fillable = 2.5 million)
  • Buy 2.5 million (25 lots) at the price of 1.2020 7 (cumulative trading volume = 6 million; remaining fillable = 0)

Then, your VWAP (Volume Weighted Average Price) will be calculated using the following formula:

VWAP = (1,500,000/6,000,000) x 1.20205 + (2,000,000/6,000,000) x 1.20206 + (2,500,000/6,000,000) x 1.20207

VWAP = 1.202062

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